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Short Term CPR Predictions for Agency MBS: Apr 2022

Mortgage rates have risen approximately 200 basis points over the past four months and prepayment rates are forecasted to decline quickly as a result. Infima projects absolute speeds to fall dramatically across the board, with the most pronounced drops in the higher coupons.

Speeds of certain cohorts within FNCL 4’s and higher are projected to drop more than 20 CPR over the next three months. The relative percentage drops in CPRs are fairly uniform across the entire coupon stack, with most cohorts expected to decrease speeds by about half (50%) of their March prepayment experience by June.

The lowest coupons, 1.5%, 2%, and new 2.5%’s, are forecast to lose about one third of their March speeds during that timeframe. The slowing CPR speeds across the entire mortgage universe are driving compression of CPR speeds amongst cohorts within coupon generics. Nonetheless those cohorts are forecast to maintain their relative rank order of CPR speeds as the prepayment slowdown occurs.

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